Sherman Associates Closes on Financing of Multifamily Housing in Northstar Center East Conversion
Tuesday, May 16, 2023 at 3:24PM
Final phases of $250 million in financing secured to reposition office towers in downtown Minneapolis
Sherman Associates closed on the $91 million purchase and adaptive reuse for Northstar East, its historic conversion of the 13-story office tower to 216 apartment homes in Minneapolis’ central business district.
The 329,000-square-foot office tower is currently vacant, having spent the past several years being strategically positioned for conversion. The office-to-housing conversion will provide new, amenity-rich, high-quality housing in the downtown core and remove outdated office space from the oversaturated Twin Cities office market. The building’s unique design allows for over 10,000 square feet of amenity space including a media lounge, sports simulator, and virtual reality rooms as well as a maker space, coworking lounge, expansive fitness center, and rooftop club room.
Each unit will be equipped with smart home technology as well as high-end appliances and solid surface countertops. Unit sizes will average over 900 square feet.
“Our investment in this historic conversion indicates our commitment to downtown Minneapolis. We see this project as a catalyst that will pave the way for creative redevelopment in both Minneapolis and cities across the country, as we reimagine our downtown communities,” said Chris Sherman, President of Sherman Associates. “This project will have positive environmental and social impacts on the local community through its historic preservation, creation of hundreds of jobs for the construction and management of the project, and in expanding high-quality living options for downtown.”
Financing partners include First National Bank of Omaha for the first mortgage, American National Bank as the bridge lender, National Bank of Commerce as the tax increment financing lender, Stonehenge Capital as the federal historic tax credit investor, and Enhanced Historic Credit Partners as the state historic tax credit investor. Financing for this project was provided in part by the Hennepin County Environmental Response Fund and the City of Minneapolis.
“Projects of this magnitude and innovation are rare. This project has been years in the making. There is no precedent for a historic, functionally related complex being simultaneously redeveloped by at least three separate organizations,” said Trevor Martinez, Senior Developer at Sherman Associates. “This project was comprised of a new residential financing tool, physical reinvention, and change of use which made it highly complex. We are excited to pioneer this unique approach to redevelopment.”
The financing for Northstar East closes in conjunction with the financing of Northstar Center West which together with the recently completed Hotel Indigo at the Northstar Center complex secures more than $250 million in collective investment into the overall Northstar Center redevelopment to reposition over one and a half million square feet of office, hotel, and parking ramp space in the heart of downtown Minneapolis.
Polaris Properties Group and Taconic Capital Advisors, who have master planned Northstar Center’s redevelopment since 2019, also closed this week on its financing to redevelop, reposition, and lease the West office tower. Northstar Center West’s renovation will introduce not only repositioned office space, but also a unique large-scale public-facing meetings and events facility, several food and beverage concepts, and hospitality staff that will service the building’s office suites.
“The intention of our project is not just to introduce more office space into the Minneapolis CBD, but rather to introduce a new type of workplace product that’s integrated with its surrounding uses, including the residential use. We think that the reinvented Northstar Center complex will offer compelling reasons for people to choose to work downtown,” said Matt Legge, Principal of Polaris Properties. “We believe in downtown Minneapolis, and it was important to us that whoever stepped in as the steward of Northstar East was a group who was equally committed to investing in the downtown core and helping Northstar Center reach its highest potential. We’ve certainly found that in Sherman Associates.”
The boutique-style Hotel Indigo opened earlier this year in the south Northstar Center building after renovation by Wilson Street Hotel Group. The fully renovated Hotel Indigo has 218 re-designed rooms with unique modern amenities including Nespresso coffee, 50” televisions, and clothing steamers. The hotel restaurant, Star Bar & Bistro, will open June 5th and features a dramatic 35’ diameter rotunda bar with a recently uncovered star constellation ceiling from the original Northstar historic complex.
Once all phases are complete, the Northstar building will be a large-scale example of a complex that was repositioned to its highest and best use. With housing, office, hotel, and restaurants/retail, it will serve downtown Minneapolis as a destination to live, work, play, and stay. All components of the project will be connected to the skyway system.
Construction is expected to start immediately on Northstar East, with completion planned for September 2024. Kraus Anderson is the general contractor and RSP Architects is the architect.
